THE HISTORY OF ENTREPRENEURSHIP IN TANZANIA

During colonial days,
totalitarian rule continued. Indigenous productive activities were suffocated
by colonial regulations and competition from imports. Throughout the colonial
period, a consistent policy was adopted to keep the colony as a producer of raw
material for use in industries in Europe, and, consequently, dependent on
manufactured goods from colonial masters. There was also a deliberate policy to
limit participation of indigenous Africans, and to a lesser extent, Asians, in
business activities. Thus, manufacturing, importing and exporting, banking and
insurance were mainly done by Caucasians. Asians, most of who had been brought
in to work as clerks during railway construction projects in the early 1960s,
were encouraged to operate as sub-wholesalers and retailers. Arabs operated
mainly as retailers.

Africans participation
in business was restricted to very small firms, such as dukawalas (tiny shops).
Except for a few offspring of chiefs, the few Africans who went to colonial
schools received only elementary education to enable them to understand
clerical and other very low duties in the public and private sector. Therefore,
at independence, the indigenous population was just as marginalized in their
own country as the economy was in the international market. For example, in
1961, about 34,581 Africans and 7,500 Asians held retail trading licenses, but
Asians handled well over two-thirds of the trade volume (Rweyemamu, 1979).

Economic and social
marginalization of Africans was part of a deliberate colonial policy of
disempowering the indigenous population and hence making it easy to rule.
Africans were made to believe that they were “naturally” inferior to other
races and everything African was backward. Naturally, this environment had a
negative effect on development of entrepreneurial values and competencies,
including self-esteem, a belief in the ability to make things happen,
confidence, initiative, aggressiveness, etc.

However, the social and
economic context created in various parts of the country presented different
opportunities for the development of entrepreneurship. For example, European
missionaries and farmers settled in some mountains areas of the country
(Kilimanjaro, Tukuyu, Bukoba, Songea etc), where they introduced Christianity,
education and commercial agriculture. They also encouraged the local population
to cultivate commercial crops and to establish cooperatives. This development
not only inspired the local population and exposed to new desires and opportunities,
but it also led to land shortages which forced them to think and act in
non-traditional ways in pursuing of livelihoods and “success.” Logically, the
meaning of “success” to an offspring of a peasant farmer labouring every year
for family subsistence will be vastly different from another who has
experienced commercial farming, is aware of the possibilities and benefits of
formal education and at the same time is aware that he will not have enough
land even for his family’s subsistence as he grows up.

2.Post-independence and Socialist
Era (1967-1985)

Tanganyika’s first
five-year development plan (1961-1966) envisaged developing the economy by
attracting foreign direct investment (FDI). Towards the end of the five-year
period, it was apparent that the expected FDI was not flowing in as expected.
There was also a concern that not much had been achieved by way of redressing
the legacy of the marginal position of Africans in the economic field left by
the colonial government. The leadership started looking for alternative
development strategies. In 1967, the government officially adopted a radical
transformation to a socialist development strategy, through the Arusha
Declaration. Activities categorized as constituting the “commanding heights” of
the economy, including banking, import-export, insurance, large houses, farms,
schools, hospitals, etc were also nationalized. The government invested heavily
in the nationalized entities as well as new ones.

Consistent with the
socialist policy, private business entrepreneurship was actively discouraged in
favor of government, community-based or co-operative-owned ventures.
Regulations were introduced to bar civil servants and leaders of the ruling
party from engaging in business activities. Since all educated Africans were
civil servants, this means that, business activities were left to Asians and
those indigenous people who had no job opportunities, and these tended to be
people who had no substantial education.

Theoretically the
socialist policy encouraged peoples’ participation in decision making. However,
in practice, the government embraced a centralized; mainly top-down
decision-making approach. It made a whole range of decisions, from who should
go to which school or college, where one had to live, crops to be grown, their
prices and where they should be sold, salary levels, etc. a culture of
dependency on the state and unquestioning obedience took root in all walks of
life. This must have contributed to stifling development of entrepreneurial
values such as initiative, willingness to take risks, need for achievement and
related competencies.

The break-up of East
African Community in 1977 coincided with a combination of other unfortunate events
heralding a long economic crisis in Tanzania. The events included the
international oil crisis of the early 1970s and a costly war between Tanzania
and Uganda in 1978/79. The economic crisis was manifested by a serious shortage
of foreign exchange and consumer products, industrial capacity
under-utilization, inflation and decline in real purchasing power among wage
earners, forcing them to undertake petty business activities to supplement
their meager earnings. Similarly, real crop prices dropped compelling peasants
and their dependants to diversify income sources by engaging in small ventures
within the rural areas or in urban centers.

The response of the
citizen to the crisis demonstrated that even the socialist policy had not
completely subdued the entrepreneurial agility of the society. Tanzanians from
all walks of the life responded to the challenge by establishing makeshift
backyard factories, smuggling goods from neighboring countries or hoarding
whatever little was available from the local industries and selling the same at
exorbitant prices. Others established informal agricultural activities, animal
husbandry, retail and other projects to supplement the dwindling formal incomes
and take advantage of the failure of state companies to meet the basic needs.
However, this “second economy” met strong resistance from the state which only
saw its dysfunctional role. The informal private business activities were seen
as being in conflict with country’s resolve to build an egalitarian society, as
it created a class which owned no allegiance to the goals of the society
(Maliyamkono and Bagachwa, 1990). In 1983, the government implemented a
ruthless campaign against “economic saboteurs,’ confiscating property and
arresting business operators of different kinds. As Maliyamkono and Bagachwa
(1990) noted, the dysfunctional approach to the second economy failed to
distinguish elements within the second economy which constituted potential
assets and those which were socially and economically detrimental to the development
of healthy economy. The crackdown on economic players in 1983 delayed the
social and political legitimization of entrepreneurial activities in Tanzania.

3.Liberalization and Economic
restructuring (1986 to date)

The economic crisis
that began in the mid-1970s intensified in the early 1980s, forcing the
government to liberalize trade and start implementing a radical transformation
programme with the urging and support of the World Bank and the International
Monetary Fund (IMF) from 1986. The Economic Restructuring Programme involved
liberalization of virtually all sectors of the economy and privatizing and
nationalizing employment in the public sector. Under the ERP, the government
gradually changed its economic policy from reliance on state-run enterprises to
promotion of foreign investment and local entrepreneurship. The private sector
is now seen as the engine of economic growth and the role of government has
been redefined to focus on facilitation rather than direct ownership and
operation of enterprises.

The reforms did not
fully ease the problem of low salaries. On the contrary, the retrenchments,
freezing of employment, privatization of state enterprises and disengagement of
the government from some activities led to substantial job losses and limited openings
for school and college graduates. Their most pronounced effect has been a
substantial net increase in the number of people whose only means of survival
is self-employment. Most of those who cannot find jobs as well as salaried
workers have, out of necessity, started micro and informal businesses to enable
them to eke out a living. Aware of its limitation to help out in the situation,
the government started encouraging workers to do so. For example, in 1992, the
government deliberately reduced the working week by half a day to give
employees more time to engage in income generating projects to supplement their
official incomes. This played a significant role in enhancing the legitimacy of
entrepreneurship activities.

Since the mid-1990s,
entrepreneurship as a career has been acquiring increasing legitimization. The
proportion of individuals consciously choosing self employment, even among the
highly educated, has been increasing. For example, while a 1991 survey of the
informal sector (URT, 1991) did not record any University graduate, a 1995
study (URT, 1995) recorded 1582 graduates in the sector. In a 1997 survey of
University of Dar es Salaam (UDSM) students by the Faculty of Commerce and
Management (FCM,1998), 81% of students indicated that they were interested in
setting up their own enterprises. In a tracer study of the FCM Alumni (Kaijage,
2000) “entrepreneurship” was rated second (next only to computer-related
courses) among aspects that were very important but not significantly covered
in the BCom programme. In a 2004 survey of final year students, Mufa (2005)
found that the proportion of those running businesses while studying had
increased from 7% in 1997 to 16%.